The LocalDine app, developed by Kyle Chronis and Clay Wayman, offers restaurant deals for diners seeking a bite to eat in Los Altos.

Coupon cutting has changed in America as mobile phone use drives increasing interest in dropping the scissors and building an app. Marketing research company eMarketer estimates that last year nearly 92 million shoppers used digital coupons, spurred on by sites like the Amazon-backed LivingSocial and its rival Groupon, which originated the deal site as we now know it in 2008.

Daily deals and their ilk present a vexing problem for restaurants, where low profit margins can make vouchers a risky business. LocalDine, a new app launched in Los Altos this month, aims to reimagine the digital coupon, tailoring it to restaurant realities and split-second dining decisions.

Los Altos resident Kyle Chronis developed the self-funded business with Clay Wayman of Mountain View. While working at an office on San Antonio Road, Chronis watched groups of his co-workers negotiating where to eat as they walked into town and realized that he was looking at a market opportunity. Diners wanted to pick a lunch spot with minimal planning, and restaurants needed to figure out how to attract such large groups.

Three clicks to a deal

As Chronis researched restaurants’ untapped data – the in-house records of slow days, the most-popular dishes and the spending habits of different sizes of group – he concluded that an app could take a fine-tuning approach by customizing diner incentives to restaurant capabilities on a given day.

A chef could promote the day’s special or offer a free appetizer to parties of five or more, and diners could browse for deals within their immediate vicinity, filtering based on their party size.

Chronis and Wayman calculated that in the restaurant business, notorious for its high fixed costs, increasing party size could make a sizable financial difference. Every empty seat in a restaurant at lunchtime represents a missed opportunity. So, a strategy that lures larger groups via discounts or special offers could prove a net win for both value-conscious diners and restaurateurs.

“If you’re going to waste a four-top table on two people, if you only get a penny more for each of two more people, it’s still another two pennies,” Wayman said of encouraging larger party sizes.

Chronis developed an app that offers restaurateurs granular control over their deals. For instance, on a quiet Thursday evening, the restaurateur could advertise a “two-for-one” deal or free soda and withdraw it two hours later. The goal is to influence local diners as they’re about to make decisions on where to go and whether to round up an extra friend or co-worker to join.

Sales reps hawking online “deals” services are thick on the ground in the Bay Area, with many startups following the model popularized by established companies such as Groupon and Yelp. Most of the deals’ vendors take a cut of each discount a business offers, in exchange for providing and promoting the deal – and hence the business – to their user base.

Chronis and Wayman want to turn the model on its head, building a subscription-based tool restaurants can use to reach diners directly and modify in real time deals that aren’t performing well. The service records statistics and enables diners to send a restaurant private feedback through the app. By building an interface clients can use to post their own details, the LocalDine team avoided the need for an internal sales staff to generate and market each deal.

For the eaters, the app avoids all payment systems – no logins or virtual money changes hands. Upon launching, the app queries party size and mealtime (e.g., lunch or dinner) to generate a display of local deals. The user presses “hold” on the deal of choice, and shows the phone to the waiter upon arrival. The app automatically tallies the deal as complete once the GPS checks the diner in at the locale.

“It’s three clicks to a deal,” Wayman said. “We’re not looking for the ability to get someone off their couch, we’re looking for someone who’s already on their way. It’s the greatest way for you to get a deal at the places you want to go.”

The app, exclusive to iPhones for the time being, was launched this month with seven Los Altos restaurants as beta testers. As of lunchtime last week, Maltby’s Restaurant & Tavern was offering 10 percent off the tab, and First & Main Sports Lounge touted half off an appetizer.

For more information, visit www.localdineapp.com.

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